End Free Tax Ride

Put new buildings on tax rolls twice yearly statewide

One of the good features of the S.C. Constitution is that it requires taxation to be uniform and equal, so that S.C. residents are taxed by the same rules statewide. This fair-taxation rule, however, may have blown a hole in the side of Horry County's effort to collect up to $4 million a year in property taxes on new buildings. Other high-growth counties are similarly afflicted by a recent S.C. attorney general's opinion that a law aimed at getting new buildings on the tax rolls more quickly is unconstitutional.

Right now, new buildings are a poster child for the notion, fervently believed locally, that existing residents pay the infrastructure costs of development. A new house or commercial building that gets its certificate of occupancy early in the year can go for up to 12 months without being subject to property taxes.

That's because bedrock S.C. tax law allows counties to "notice" that the buildings are completed and occupied only at the end of December. Meanwhile, the occupants of houses and other new buildings enjoy public amenities supported with local tax payments - police and fire protection, for instance, and public education. This is especially irksome because many new buildings getting free rides on taxes have high valuations, depriving counties of significant revenue.

In response to pleas from development-stressed counties, the S.C. General Assembly allowed county councils that wished to do so to put new buildings on the tax rolls twice a year: at the end of December and at the end of June. This local option, once exercised, could cut the taxation free ride to owners of new buildings to no more than six months, thereby increasing tax collections for counties, municipalities and school districts.

But S.C. Attorney General Henry McMaster opined recently that the law violated the Constitution because it could result in similar kinds of property being taxed differently in different counties. Slow-growth counties have no incentive to put new construction on the books more than once a year, prospectively creating a nonuniform tax situation.

Attorney general opinions lack the force of law. So counties, under the law, remain free to exercise their option to collect taxes on new buildings twice a year. But any county that does so has a high probability of getting sued.

McMaster could be wrong; the courts could deem the local-option tax-collection law to be constitutional. But there's no guarantee going in that the county that goes first in exercising the option, spending public money on legal fees when it inevitably gets sued, would win in court.

Counties shouldn't have to fight constitutional battles to obtain tax justice. The General Assembly in 2007 should mandate that all 46 counties place new buildings on the tax rolls in June and December, creating tax uniformity across the state. Such a law would take some of the steam out of the anti-development movement in Horry and other counties, while giving county governments' tax-collection efforts the protection of the state.